Where Innovation Works…
NAREIT Presentation San Francisco, CA
November 12, 2013 John Kilroy Chairman, President and CEO
Welcome 1 Agenda
303 Second Street, San Francisco I. John Kilroy Chairman, President and CEO, Welcome KRC
II. Edwin M. Lee “Everybody’s Mayor, San Francisco Favorite City”
III. John Kilroy 201 Third Street, San Francisco Chairman, President and CEO, KRC Update KRC
IV. Chris Roeder San Francisco Managing Director, Market Update Jones Lang LaSalle
100 First Street, San Francisco V. Q&A
VI. Cocktails and Hors d’ouevres
2 San Francisco Mayor Edwin M. Lee
“Everybody's Favorite City” 3 John Kilroy Chairman, President and CEO
KRC Update 4 Investment Thesis
LOCATION PHYSICALITY YIELD & TIMING
Transbay Terminal
Housing Options
Retail Amenities
Companies need high quality space in the best locations to attract and retain
their workforces 5 Premier West Coast Franchise
December 2009 Annualized Pro Forma 9/30/2013
13% GREATER SEATTLE
GREATER Enterprise Value SEATTLE $6.5 Billion
35% 100% NORTHERN SOUTHERN Enterprise Value CALIFORNIA CALIFORNIA $2.6 Billion
SAN FRANCISCO BAY AREA
52% LOS ANGELES 12/31/2009 SOUTHERN 9/30/2013 ORANGE COUNTY CALIFORNIA SAN DIEGO
LOS ANGELES ORANGE COUNTY SAN DIEGO
KRC’s expanded and stronger platform generates significant value
Note: Pro forma NOI reflects GAAP NOI for the 9 months ended 9/30/2013 annualized , including a full year’s contribution from acquisitions as well as near-term development projects (690 Middlefield, 331 Fairchild, 350 Mission Street, 555 N Mathilda Campus, 333 Brannan, Crossing 900, Columbia Square, The Heights) and 6 redevelopment projects currently in lease-up. Proud to be a part of the San Francisco landscape
KRC’s SOMA Portfolio – 2.7mm SF • $777 mm in acquisitions; 2.1mm SF • $368 PSF basis • $378 mm of estimated development investment
KRC’s SOMA Footprint San Francisco, CA 7 7 You Can’t Ignore The 21st Century “Modern” Workforce
Decline in Office Space The Millennial Generation per U.S. Worker (Per square feet) 600
225 176 151
1970s 2010 2012 2017E
Source: CBRE. KRC’s Commitment to Sustainable Practices . 37% of portfolio is LEED certified . 50% of portfolio is ENERGY STAR certified . Development projects 100% LEED certified
8 Responding to the 21st century “modern” workforce
201 Third Street San Francisco, CA 9 9 “Shaping old into new state of the art” Medium for stimulating environments
201 Third Street San Francisco, CA 10 10 BEFORE… Case Study: 360 Third … AFTER Street
What We Purchased? • Former Pac Bell building, built in 1974 as a call center
Why We Purchased? • Terrific location - proximity to BART, Caltrain and Muni • Large, efficient floor plates about 68,000 SF
Opportunity • Created “South Beach” rooftop deck • Upgraded lobbies and elevators to state of the art • Secure bike storage and showers • Collaborative breakout areas • Parking garage and on-site management office • LEED Gold certification
360 Third Street San Francisco, CA 11 11 Total Building Transformation Digital, media and tech powerhouse
360 Third Street San Francisco, CA 12 12 “What the tenants want” Amenities for today’s workforce
360 Third Street San Francisco, CA 13 13 “Cool in the city” Urban rooftop terrace
360 Third Street San Francisco, CA 14 14 Inspiring creativity
360 Third Street San Francisco, CA 15 15 “Feels a little less like work, with inviting spaces where people eat, chat and relax”
360 Third Street San Francisco, CA 16 16 Chance interactions and creative collisions
360 Third Street San Francisco, CA 17 17 UPDATE ON NEAR-TERM DEVELOPMENT PROJECTS
Facilities to Attract and Retain the Modern Workforce 18 KRC’s Current and Near-Term Development Pipeline
Total Estimated Total Project Investment Square Feet Current Projects
$792 Million 1.4 Million
12% of enterprise value
Near-Term Projects
Columbia Square (Mixed Use) $670 Million 1.1 Million Crossing/900 10% of enterprise value 333 Brannan
$2.3 Billion TOTAL $1.5 Billion 2.5 Million
22% of enterprise value 19 On-Time and On-Budget to Provide Significant Shareholder Value
Construction Completion
2013 - 2014 2015 2016
Columbia Square Phase II
Crossing 900
Columbia Square Phase I 333 Brannan
Creating Significant Shareholder Value
Historical average of ~80% leased upon completion 20 Bringing Hollywood back…
• $390 million total investment • 675,000 square feet of office, residential and retail
Columbia Square – Mixed Use Project Hollywood, CA 21 21 Contemporary work place
Columbia Square – Mixed Use Project Hollywood, CA 22 22 A Transit Centric Location
• $180 million total investment • 300,000 square feet of office
Crossing 900 Redwood City, CA 23 23 An Urban Village Aesthetic. A Whole New Vibe.
Crossing 900 Redwood City, CA 24 24 The Future is now…
• $95-$100 million total investment • 170,000 square feet of office • LEED Platinum-certified • Building integrated photovoltaics • Living roof • High performance building envelope
333 Brannan Street San Francisco, CA 25 25 Where people interact with nature in an urban environment
333 Brannan Street San Francisco, CA 26 26 It’s a New Era in Office Space
• Circles, squares and triangles • 21st century modern workforce • KRC is well positioned to capitalize on opportunities
201 Third Street San Francisco, CA 27 27 Chris Roeder Managing Director, Jones Lang LaSalle
“Live, Work, Play” 28 “KRC’s Grand Entrance”
1. Invested the “right” product in the “right” submarkets a) SOMA b) Value-add properties with large floor plates
2. Progressive work environments a) Modern lobbies b) Collaborative space c) Amenities: roof decks, landscaped plazas, bike rooms with showers
3. Expedited delivery and deal process: a) Spec suites ready for occupancy b) Well-oiled machine
29 Supply Continues to Shrink
Large Block Availability Trend
10,000,000 120 Large blocks of space have been on the decline Available Space No of Blocks 9,000,000 110 – especially among blocks over 100,000 SF 8,000,000 100 7,000,000 90 6,000,000 80 5,000,000 70 4,000,000 Supply & Demand 3,000,000 60
2,000,000 50 Number of blocks Number of requirements
54 200,000 + 53 2 100,000 - 199,999 10
222 Second Street, 535 Mission Street, 181 7 75,000 - 99,999 5 Fremont Street, 1 Tenth Street, 22 Fourth Street 17 50,000 - 74,999 14
34 30,000 - 49,999 30 Source: Jones Lang LaSalle 30 Tenant Demand Remains Steady into 2013 – Continued Office Expansion Expected
Demand by Industry (SF) Technology 1,898,000
Financial Services 1,121,200
Professional Services 647,000
Legal 585,000
Education 541,000
Media/Entertainment 490,400
Advertising/Marketing/PR 350,500
Government 335,000 Historical Leasing Activity (SF) Real Estate 228,000 2013 Projected 11,200,000+ Insurance 133,000
0 500,000 1,000,000 1,500,000 2,000,000 2012 11,131,816
2011 10,786,225 Leasing activity projected to accelerate into 2014 with a number of large deals to close before year-end 2010 8,578,354
2009 6,090,714
- 5,000,000 10,000,000 15,000,000
Source: Jones Lang LaSalle 31 Record Leasing Activity and Large Deals Leading up to and Through 2013
18 of the 35 deals (51.0 percent) San Francisco Completed Leases over 100,000 square feet in the last Tenants +100,000 SF, 1995 - 2013 36 months have been on account of ’11 – ‘13: 35 deals in 36 months technology tenants
’99 – ‘00: 13 deals in 24 months ’06 – ‘07: 15 deals in 24 months
3,000,000 2,575,052 14 2,389,559 2,567,771 13 12 2,500,000 12
10 P 10
2,000,000 9
1,197,984 9 r 1,613,412 8 o 8 1,497,909 j 1,500,000 1,187,152 7 1,230,099 e
6 6 c 6 Square Square Footage 899,487 827,199 5 5 t Numberof deals 1,000,000 4 473,007 873,314 e 758,634 4 464,000 d 244,552 312,000 3 3 500,000 155,000 153,000 115,000 2 2 2 1 1 1 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year
Total SF Number of deals completed
Source: Jones Lang LaSalle 32 Absorption Driven by Technology Industry - Expected to Continue
Year-end 2013 absorption expected to be 1.0 M SF+
Technology continues to lead net absorption
Source: Jones Lang LaSalle 33 John Kilroy Chairman, President and CEO
Conclusion 34 Focused on High-Growth, Best Performing West Coast Markets
Centers of innovation and creativity
Greater Seattle Fremont Lake Union, Seattle Gateway, coastal markets
Critical mass of knowledge 100 First Street, San Francisco companies San Francisco Bay Area Highly educated Tribeca West, Los Los Angeles workforce Angeles
San Diego Great quality of life Kilroy Centre Del Mar, San Diego 35 Q&A
36 Where Innovation Works…
37